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What are the forward price and the value of the contract

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A two-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $73 and the risk-free rate of interest is 5% per annum with continuous compounding.

Question a. What are the forward price and the initial value of the forward contract?

Question b. Six months later, the price of the stock is $77.5 and the risk-free interest rate is still 5%. What are the forward price and the value of the contract?

Question c. If the stock pays a dividend of $3.5 twice a year (ie. Pay $3.5 every six months), what is the forward price?

Reference no: EM132918834

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